Lean Think in Manufacturing Industries

Presented By: Kassu Jilcha

A PhD Candidate at Addis Ababa Institute of Technology

School of Mechanical and Industrial Engineering

September 2015

Presentation outline Introduction Definition of LeanBackground of Lean Comparisons of traditional and lean organization

Benefit of Lean Ethiopian Manufacturing IndustriesWhy Postgraduate Training program development?

Conclusion

11/27/2022 Lean manufacturing through education 3

Introduction Industrial development strategy is the main Goal of GTP2.

In transforming industries from ground level planned stage, it needs lean thinking approach as one of the bests transforming change

It also needs strong participation of higher institution in manpower development like IOT’s and Industrial sectors

The over all growth transformation of Ethiopia is based on education quality and over all coverage

When Citizen knowledge and innovation improved, then transform the growth to the next platform

11/27/2022 Lean manufacturing through education 4

Definition Lean reduces cost, improves quality, and speeds delivery by eliminating non-value added activity in a process by identifying and eliminating waste.

Lean is defined as a process that includes five steps: the first step is defining customer value, then defining value stream, making it ‘flow’, establish pull, and last is striving for excellence (Nadia et al,2006)

Waste is defined as any human activity which absorbs resources but creates no value

Value is defined by (Womack & Jones, 1996) as a capability provided to a customer at the right time at an appropriate price

Background of Lean Lean 1st founded WWII Japan in 1940 (Sakichi Toyoda and chief

engineer Taiichi Ohno) Toyota Production System (TPS) grounded in the systematic

elimination of what Toyota identified as the eight deadly wastes.   Mass production Lean production

Basis Hennery Ford (standard Motors company)

Toyota (Varied Motor products)

People-design

Narrowly skilled professionals

Team of multi-skilled workers at all levels in the organizations

People -production

Unskilled or semi-skilled workers

Team of multi-skilled workers at all levels in the organizations

Equipment Experts, single purpose machines

Manual and automatized systems which can produce large volume with large product variety

Production methods

Makes high volume of standardized products

Make the product which the customers ordered

Organizational philosophy

Hierarchical- management take responsibility

Value streams using appropriate levels of empowerment- pushing responsibility further down the organization

Philosophy Aim for good enough Aim for perfection

Production Systems Compare

Eight Types of Waste identified by Toyota. s/

n Form Description

1 Overproduction

Producing more than it is needed or/and used. (production ahead of demand)

2 Human Resources

Not using people mind and getting them involved/Unused Employee Creativity

3 Transportation Moving tools/materials to the point of use, moving products that are not actually required to perform the processing

4 Inventory Materials or information, Includes WIP and Finished goods, all components, work in process, and finished product not being processed

5 Motion/repetitive

Movement of people (walking, riding) as well as smaller movements more than required (chain of work should be culture)= develop responsibility

6 Corrections/defects

This includes rework or fixing of products/ “measure ten times, cut once”

7 Over-Processing

Additional work above the requirements and/or needs. resulting from poor tool or product design creating activity

8 Waiting Time delays for materials, information or people. waiting for the next production step, interruptions of production during shift change

cont’d The Lean Enterprise Research Centre (LERC,

2004) at Cardiff Business School highlighted that for most production operations:

5% of activities add value;35% are necessary non-value adding

activities;60% add no value at all.

The ultimate goal of lean is to avoid the eight deadly wastes in production process Hence, lean production is a continuous process towards perfection

Comparisons of traditional and lean organization (MELTON, 2005)

Concepts Traditional organization Lean organization Inventory An asset, as defined by

accounting terminology A waste- ties up a capital & increases processing lead-time

Ideal economic order quantity and batch size

Very large- run large batch sizes to make up for process downtime

One- continuous efforts are made to reduce down time to zero

People utilization

All people must be busy at all time

Because work is performed based directly upon customer demand, people might not be busy

Process utilization

Use high speed processes and run them all the time

Processes need to only be designed to keep up with demand

Work scheduling

Build products to forecast Build products to demand

Labor costs Variable fixedAccounting Traditional (functional)

departmentsCross-functional teams

Quality Inspect/sport work at end of process to make sure we find all errors

Processes, products, and services are designed to eliminate errors

Forces opposing and driving a change to lean

Bei

ng L

ean

Forces Supporting Lean Forces Resisting Lean • The need to get closer to customers in an

increasingly competitive environment • The desire to be compliant in an increasingly

regulated environment The potential benefits:Financial- decreased operating costs, potential capital avoidance

Customers- better understanding of their needs

Quality –more robust processes leading to less error

People- empowered multi skilled teamsKnowledge- increased understanding of the whole supply chain including the manufacturing process and all other processes within the value stream

   

Natural resistances to change seen as :• Skepticism/doubt on the validity of the lean

philosophy• “We have seen this before” assuming

“lean” is another improvement initiative or “fad/fashion”

• Lack of availability of time – too busy with the “day job”

• Concerns about time impact of change on regulatory compliance (SHE, quality, etc.)

Production culture: • Large campaigns, large batches, minimal

change overs, never stop producing• Manufacturing drives the supply chain-

support needs to “keep up”• Functional culture- staying in functional

silos   

Principles of Lean

Critical Success Factors in lean thinking are:

Top Management Support, Focus on the Goal, Focus on the long Term, Involve everyone at all levels of the organization

and Involve customers and supplies.

Benefits of Lean Manufacturing

1. Financial benefits of Lean Manufacturing :• Reduction of circulating assets (stock and in-process materials):

reduction of capital used, increase in cash-in-hand, improved return on investment,• Work on productivity and profitability,• improving the bottom line by reducing production costs

2. Industrial benefits of Lean Manufacturing :• Less investment for same level of production• Increased production at constant investment• Ecological production, more compact plants• Improved quality.

3. Commercial benefits of Lean Manufacturing :• Production in phase with customer demand, • Reduction of delivery times, and• Greater customer satisfaction.

Overproduction Human resourcesTransportationInventoryMotion/repetitive Corrections/defects Over-Processing Waiting/lead time

Ethiopian government has taken initiative in 2010 to commence the GTP where greater emphasis has been given to manufacturing sectors which are:

labour intensive ,have linkages to the rest of the economy, use agricultural output as inputs ,export oriented and substitute import and contribute to rapid technology transfer. (EEA, 2013).

Since 2000 - 2012/13 the sector is growing at an average growth rate of 10.6% annually and a less than the industry average growth rate is recorded in the manufacturing sector, whereby it grows at an average rate of 8.6% within the specified period.

Ethiopian Manufacturing Industries Level

Ethiopian ---cont’dMedium and large scale manufacturing industries have registered a figure between the above two rates where its average annual growth rate has been 9.9% over the same ranges of years

The manufacturing sector contributes only 3.7% at the end of GTP of 2011/12 and is declined from 6.4% of 2003/04 (Amare et al., 2015)

Average of three years value at constant factor price for manufacturing value added has been found 8.9 billion birr (before GTP1) and 13.12 billion birr (after GTP1).

The leading manufacturing sector has been taken by the group of light industries (food, beverage, leather and textile).

Ethiopia---- Cont’dHeavy industries such as chemicals and basic iron and steel arefound to be import intensive

While the light categories and others are domestic resource intensive ones.

So, in our country’s context, the share of Industrial sector in general and the manufacturing sector in particular is not only unsatisfactory but also declining

The share of the manufacturing sector industries in GDP has further shrunk as evidenced from the declined figure of 6.4% in 2003/04 to 3.7% 2011/12(Daneal, 2007 , EEA,2013, Gebreeyesus,2009).

Ethiopia---- Cont’dBasic iron and steel firm had used to import 93% of its input requirement before GTP (7%)

It has shown a reduction in its imported resource proportion over the first three GTP implementation periods to 91% import proportions (9%)

The government has intentionally devalued the local currencies from 10.96birr/USD in 2009/10 base year to 17.34birr/USD in 2012 and further to 20.28birr/USD in 2015 as a discouraging tool to import.

Manufacturing industry dominated by the food, beverages, leather, textiles, and apparel industries, contributed an insufficient 4.4% to GDP in 2014 and on average grew only by 11% during the same period

(Martins,2015)

Export Values of manufacturing sectorsThe money value of export of Food and Beverage rose from 2.77million birr (2010) to 12.52million birr (2012).

The average receipt from Textile has been 0.86 million (before) and 2.58 million birr (after) GTP or in GTP.

The wider margin of export earning in manufacturing sector is generated from Leather and leather products next to food and beverage.

It recorded an export value of 4.97million, 12million and 17million birr for the first consecutive years of GTP (2011,2012,2013).

Of chemical exports, the major ones are soap and detergents, cleaning and polishing, perfumes and toilet preparations generating 73.3% of the sub-sector’s receipts.

The industry has improved its export performance over the periods scoring a larger amount of earnings in the GTP from 0.20million birr in 2009 to 0.96million birr by 2011.

However, it is not an achievement and rather it needs industries collaboration with institutions/universities to bring radical changes in leaning manufacturing

But the GTP has not been able to foster and accelerate structural transformation of the economy and the share of the manufacturing sector in GDP remained stable at a rather low level

Export ---cont’d

Employment Well matured and efficient manufacturing sector raises national incomes and creates demand for the traditional sector products and provides growing employment opportunities (Martins,2015).

It is at the heart of modernization of the economy. Regardless of this, being at its immature level in Ethiopia, total employment in major manufacturing industries grew still in thousands out of 90 million from 93,500 workers in 2000 to 132,172 in 2008 and 200,014 in 2012.

Annual average employment growth rate of 11.48% during 2008-2012

So far, Ethiopia has not made significant progress in pulling labor out of agriculture into more productive and industrial jobs.

Share of employment in agriculture is relatively unchanged between 1999 & 2005, but then declined from 80.2% in 2005 to 77.3% in 2013

Sectorial Contributions to GDP and GDP Growth (NBE,2014)

Why Postgraduate Training program development?To lean manufacturing industries through diffusion

of knowledge More literate and trainable labor force could

make Ethiopia more attractive to international firms seeking low-wage countries (Chandra et al. 2013).

To Satisfy High demand of professional training of local society at proximity

To Upgrade knowledge in line with technological changes beyond usual training

To introduce way how to innovate products /modify it

The productivity of firms is strongly and positively correlated with worker education and training in Ethiopia (world bank, 2012).

Why Postgraduate Training program development?Poor supply of appropriately skilled labor as a major

obstacle to improving the competitiveness of the manufacturing sector in Ethiopia(World bank, 2012).

The reason, Ethiopian manufacturing sector is still relatively underdeveloped and not heavily reliant on more technical production is due to lack of skill.

In the medium term, poor nations need to invest in overall improvement in education quality, with special focus on science and technology (Ansu & Tan, 2012).

To increase productivity of firms Ethiopia’s education sector will need to develop and supply the appropriate managerial, technical and soft skills within the workforce

The Industrial park strategy in Ethiopia hinges on attracting FDI in the export-led and labor-intensive manufacturing sector (WB,2012).

Hence this program opening is important to fulfil this government strategy.

Why Postgraduate training program … cont’d

To graduate engineers who are equipped with management knowledge (engineering optimization +MGT skills)

To initiate culture of researches that helps to conduct investigation of natural resources from renewable energy (Sun+ wind+ underground+ water)and others

To enhance culture that initiate collaborative works Skills shortages in Ethiopia constitute a key constraint to

growth and improved productivity in the manufacturing sector(World Bank, 2012)

To develop linkage between: University- industry (through teachers & learners)Industry-industry (through learners experience sharing at

university)University-University (through research, knowledge sharing

integrating)

Conclusion In general the contribution of lean thinking to manufacturing starts at institutions and bring changes to starved professional industries

It is demand of government to transform the economy of citizen from agricultural lead to industry lead economy.

In order to do this, we should produce lean thinkers professionals

This program opening is the steeping stone where the local industrial employees get the chance to upgrade them selves and bring lean thinking in manufacturing

The integration between industry, university, university-industry will be strong one demanding the other.

Here is core point that the industrial development achievement comes to a target in GTP2 and lean manufacturing proces

“The world we have created is a product of our thinking; it cannot be changed without changing our thinking”, Lawrence J. Peter “A bad system will defeat a good person every time.” – Deming 

“If (we) don’t have time to do it right, when will (we) have time to do it over?”-- J. Raymond Robertson

“Universities are opportunities not threat for industries let you utilize them”

Collaboration